Quebec's New Tax On Netflix, Amazon A Reaction To Feds' Laissez-Faire Attitude

Residents of La Belle Province should expect to pay more for online purchases starting next year.

Jacques Boissinot/CANADIAN PRESSQuebec Finance Minister Carlos Leitao is joined by Premier Philippe Couillard, as he arrives to table his budget on March 27, 2018 at the National Assembly in Quebec City. The budget includes a measure to tax Netflix and other foreign online businesses.

Quebec has made good on a vow to charge provincial sales tax on Netflix and other foreign online businesses that have customers in the province.

As part of its latest budget, unveiled Tuesday, the provincial government said it will require foreign online services to register with the province as of January 1 of next year, and start collecting the 9.975-per cent provincial sales tax.

The tax will apply to sales at Amazon, Netflix, Spotify, iTunes and other online services that operate from outside Quebec.

Online companies without a major presence in Quebec will be exempt from collecting the tax until Sept. 1, 2019. The law will only apply to companies that collect more than $30,000 in revenue from Quebecers.

The move comes in response to the federal government's decision last year not to tax U.S.-based Netflix, and to exempt it from Canadian content rules in exchange for a commitment from Netflix that it will invest $500 million into Canadian programming.

That deal met with considerable opposition in Quebec, in large part due to the fact Netflix didn't commit to creating French-language content.

Quebec's Liberal government urged their federal counterparts to reconsider the deal, arguing that not charging sales tax on foreign sellers would put domestic businesses at a disadvantage.

In Quebec, for instance, Netflix faces competition from Videotron's Illico streaming service, as well as from Bell's national CraveTV streaming platform, which collect sales taxes.

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The province loses $270 million annually by not collecting taxes from online sales, and a majority of that — $158 million — comes from the sale of clothes and shoes, provincial Finance Minister Carlos Leitao said, as quoted at Bloomberg.